Growing number of developers seeing the value of bridging finance

Since the global financial crash businesses in all sectors have found conventional bank finance much harder to come by - and that has been especially true for the property sector.

The upside is that a whole industry offering avenues of alternative finance has sprung up. One of the more successful of these avenues has been bridging finance.

The property department at MSB is reporting that this method of funding property developments is now more popular than it has ever been and is key to making sure many schemes go ahead.

Short-term
Bridging finance is a form of fast, short-term funding which is secured on property and can be invaluable when investors and developers need to move quickly to secure a site.

A standard loan to fund a scheme can typically take three months or more to complete. Many developers, particularly smaller-scale ones, often need to buy quickly to get a discount, for example at auction.

The bridging loan fills that funding gap until longer-term finance can be put in place and there are a number of specialist bridging finance lenders in Merseyside that have emerged to meet this growing demand, including Southport-based Gemini Finance.

Sector specialists
Darren Barwick, an associate solicitor at MSB, said: “Bridging finance has a number of advantages, apart from just being quick. Lenders are usually backed by private finance so will be more flexible in who they will lend to.

“Also, the underwriting teams at bridging companies are usually property specialists so are experts at identifying the great deals and understanding the needs of investors and developers.

“Repayment terms may be up to 12 months but typically they are more likely to be six months or less. As the name suggests, bridging finance is not long-term finance, but a facility that can make all the difference as to whether or not a deal goes ahead.

“We have seen a real rise in the number of developers looking for bridging finance in the last few years and I can only see that trend continuing.”